The impact of these forced labour tariffs on India is expected to be multidimensional, particularly affecting labour-intensive industries. Agneshwar Sen, trade policy leader at EY India, noted that exporters in sectors such as textiles, garments, carpets, leather products, and brassware could face an additional 10% levy under Section 301, compounding their existing tariff exposure. However, the proposal also includes a mechanism for textile and apparel products, allowing a certain volume of imports from selected economies to enter the U.S. at lower rates.

Sen urged India to submit detailed written representations by July 6 and participate proactively in public hearings on July 7 to challenge these conclusions. The USTR has allowed countries to request participation in these hearings by June 22 and submit written comments by July 6. This procedural window offers a critical opportunity for India to present its case and potentially mitigate the adverse effects of the proposed tariffs.

The Global Trade Research Initiative (GTRI) has characterized the tariffs as part of a broader effort to increase pressure on India. GTRI suggested that India should treat the BTA negotiations and the Section 301 investigation as separate matters. With the reciprocal tariff framework struck down, GTRI argued that the rationale for the BTA has diminished, describing the current proposal as increasingly one-sided. The think tank advised India to reassess its participation in the BTA and consider stepping away, similar to Malaysia's approach.

GTRI also warned that India should prepare for additional Section 301 tariffs in areas such as excess capacity. This suggests that the current proposal may be just one facet of a larger strategic effort by Washington to leverage trade policies for broader economic concessions. The simultaneous pursuit of an interim agreement and the imposition of tariffs highlights the complex diplomatic landscape India is navigating.

The U.S. administration has faced increasing pressure to find an alternative revenue source after the Supreme Court's ruling. Section 301 investigations provide a statutory basis for such actions, allowing the USTR to impose duties unilaterally if it determines that foreign practices are unreasonable or burdensome to U.S. commerce. The invocation of forced labour prohibitions, while framed as a moral imperative, serves a practical economic function in sustaining tariff levels that would otherwise be legally vulnerable.

India's response strategy will likely focus on both immediate procedural defenses within the Section 301 framework and long-term diplomatic negotiations. Engaging in the public hearings and submitting detailed rebuttals are immediate steps to contest the findings. Concurrently, the ongoing talks for an interim agreement and a BTA represent the broader geopolitical context in which these tariffs are situated.

Future Impacts on Bilateral Trade Dynamics

The proposed tariffs signal a shift toward using human rights-related trade barriers as primary economic leverage. If India fails to successfully challenge the findings or negotiate exemptions, its export competitiveness in labour-intensive sectors will erode relative to nations with lower tariff rates. This could accelerate supply chain diversification away from India, benefiting competitors in Vietnam and Bangladesh. Conversely, a successful negotiation of the interim agreement might secure limited exemptions, preserving some market access while establishing a new precedent for how US-India trade disputes are resolved through regulatory rather than traditional tariff negotiations.